Govt targets big firms with big advance tax bills

FBR has to collect Rs263 billion in nine days to meet outgoing fiscal year’s target.

ISLAMABAD: The government has now started targeting big firms to generate billions of rupees in advance tax in a clear ‘hook or by crook’ attempt to meet the outgoing fiscal year’s annual target, since it faces the mammoth task of generating Rs263 billion in just nine days.

With only a little over one week left in the close of fiscal year 2015-16, tax authorities have pooled about Rs2.84 trillion against the annual target of Rs3.104 trillion. Performance in the month of June has so far remained sluggish, as the Federal Board of Revenue (FBR) collected less than Rs200 billion, about 4% higher than the collection during the first 21 days in the previous June.

Sources said that top authorities in the Ministry of Finance and the Federal Board of Revenue (FBR) have started approaching oil & gas, telecommunication and banking companies to meet any possible shortfall in revenue. “The companies are being asked to deposit advances in June and get the money back in the first couple of months of new financial year,” said the sources.

“The country’s large taxpayer units were anticipating huge shortfalls in revenues, particularly the Islamabad unit that is foreseeing about Rs50 billion shortfalls against its target,” added the sources. “The situation may get better, if the tobacco and cement sectors cooperate.”

The official move to get ‘unlawful’ advances highlights growing pressure by the tax authorities, as it has already been penalising the taxpayers by blocking their genuine refunds. A Federal Tax Ombudsman (FTO) commissioned report has accused the Finance Minister of controlling releases of taxpayers refunds. The FBR denies this.

The growth in payments of refunds is so far negative underscoring the FBR was withholding refunds to inflate revenues.

The companies have been approached for taking advances despite the deadline to deposit the advance income tax has already lapsed on 15th of this month. Almost all the companies have deposited their advance income tax except those that are contesting the FBR’s claims, said the sources.

The tax authorities got about Rs20 billion in advance income tax by June 15 as against Rs32 billion in the same period of the last fiscal year.  The authorities say that they are still hoping to get at least Rs17 billion more in advance income tax, which was due by June 15 but not timely paid.

FBR spokesman Dr Mohammad Iqbal insisted that the authorities were approaching only those taxpayers who did not deposit their due advance taxes.

“A government-owned company got a message from the top echelons to pay advance tax and get back the money in July,” said the sources.

“The FBR already owes about Rs18 billion in refunds to this firm.”

The authorities also approached some commercial banks with a request to give advances. These banks showed reluctance to give advance on the ground that the FBR took years to absorb earlier advances.

But the FBR authorities are insisting that the banks should deposit taxes that they will withhold in June and July. The banks are of the view that the automated systems do not allow to meet this demand. The sources in the banking industry said that the FBR has threatened to pass orders on allegations of collecting taxes from the taxpayers but not depositing the full amount in the kitty.

The banks are worst victims of the highhandedness of the FBR, according to the industry people.

The government is struggling to achieve the Rs3.104 trillion target despite introducing a mini-budget in December last year and tinkering with sales tax rates on petroleum products. The December mini-budget was one of the most regressive in years as the government brought those items in ambit of custom duties and sales tax that had remained exempted.

In December last year, Finance Minister Ishaq Dar had said that as many as 61 items were brought under the regulatory duty regime for the first time. The government levied 5% to 10% regulatory duties on these items including 20 food items. Out of 350 items that saw up to 10% further increase in regulatory duties, as many as 183 were food items. 

Published in The Express Tribune, June 22^nd, 2016.

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